The government budget for 2014? Welcome to 1984! That’s how the discussion about the 2014 government budget proposal could be summarised. Reality in stark contrast to official claims, that was the foundation of Orwell’s novel ‘1984’. And many of the essential claims of government officials concerning the next year’s budget are in stark contrast to reality.
To find out how things really are, you only need a few simple questions. And answer them right away. Will the state spend more or less than today? It will spend more. Is the tax revenue in 2014 supposed to be higher or lower than in 2013? It is supposed to be higher. Is the next year’s tax burden on businesses going to be higher or lower? It is going to be higher. Will the national debt of Slovakia be higher or lower at the end of 2014? It will be higher.
In this context, the government‘s arguments about public finance consolidation and its lowest possible impact on economic activity and growth sound like a very bad joke. The government’s intentions with the tax on corporate income are a grotesque proof of this. Lowering the tax rate from 23% to 22% was boastfully announced as a positive signal from the government towards the economy. But it takes only one look at the budget proposal for everyone to easily understand that in fact, the opposite is true. The overall effect of lowering the tax rate combined with a planned introduction of the so called loss tax is supposed to bring 84 million Euros to the budget. In other words, the government used an unfair trick, so they can boast about lowering the tax rates and simultaneously collect more money from companies.
A discussion about how much taxes should the state collect from its citizens, entrepreneurs and companies, is completely legitimate. I think it should collect far less than today. But on the other hand, I try to understand the arguments of others, who think it should collect more. The problem of the next year’s budget discussion is that the raising of taxes is presented as their lowering. When nothing is as it seems, when the real meanings of claims are their opposites, we are back in 1984. In an orwellian world, where the truth is a lie.
Therefore, if the proponents of higher taxes stopped hiding behind claims that red is in fact green and then tried to support the unpleasant truth with correct arguments, the quality of the discussion would rise significantly. Whether we will live to see this, is questionable. And unfortunately, this doubt is going to be supported by long years of experience.
Ján Oravec, the article was published in Hospodárske Noviny on 16th October 2013.
Translated by Jakub Jablonický.